Well I've eliminated the following:
Bad media - I've tried 5 different brands including verbatim dvd-rs. High speeds, low speeds. Nothing.
Bad burner - I've tried on 2 different burners.
Fake WiiKey - you can see by the pictures that it's the legit one.
Bad install - No I didn't "start with a blob of solder and drag it from point to point." I posted the method I used and it consists of soldering the wire to one point, gently bending it to the next point, soldering it down, and snipping it.
So I now believe that I have a DOA WiiKey. I guess what I'll do now is take the Wii apart again and check my connections for the billionth time, desolder, resolder using the true wire method, and if it still doesn't work getting a new WiiKey from foundmy.com would be justifiable (hopefully a free replacement).
If anyone else has any good ideas (or crazy ones) please let me know